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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: August 25, 2014
+ ITA 188/2014
DIRECTOR OF INCOME TAX-(EXEMPTION)
..... Appellant
Through Mr.Kamal Sawhney, Senior
Standing Counsel
versus
THE AJAY G. PIRAMAL FOUNDATION
..... Respondent
Through Mr.Ajay Vohra, Advocate with
Ms.Kavita Jha, Advocate
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE V. KAMESWAR RAO
SANJIV KHANNA, J (ORAL)
1. This appeal by the Revenue, under Section 260A of the
Income Tax Act, 1991 (,,Act), impugns the order dated 30.06.2013
passed by the Income Tax Appellate Tribunal (,,Tribunal), in the
case of Ajay G. Piramal Foundation (assessee) and pertains to the
assessment year 2006-07.
2. Ajay G.Piramal Foundation was founded on 30.07.2005 with
the object to establish, develop, maintain and operate hospitals,
ITA 188/2014 Page 1 of 13
medical schools, medical colleges, nursing institutions, dispensaries,
maternity homes and child welfare centres etc. It was granted
registration under Section 12AA with effect from 30.07.2005 and
approval under Section 80G was also accorded vide order dated
31.01.2006.
3. Return, declaring income ,,Nil income, for the assessment
year 2006-07 was filed on 30.10.2006. On 10.01.2007, the
respondent assessee filed a revised return declaring income of
Rs.13,95,711/-. We shall be referring to the note appended by the
assessee, as to why the revised return was filed, subsequently.
During the course of the assessment proceedings the assessee
claimed that the revised return, dated 10.1.2007, be ignored and the
first return should be treated as the correct and true return. Revised
computation was filed. The Assessing Officer did not agree and
held that in terms of the decision of the Supreme Court in Goetze
(India) Limited vs. CIT [284] ITR 323, the assessee could not have
filed the revised computation and said claim could have been only
made by way of a re-revised return. Further, the time period for
filing of a revised or re-revised return under Section 139(5) had
come to an end. Thus, the revised return dated 10.01.2007, could
only be taken into consideration.
ITA 188/2014 Page 2 of 13
4. The Assessing Officer thereafter went into the question
whether 16,50,000/- shares of Nicholas Piramal India Limited
received by way of gift/donation, from The Piramal Enterprises
Executives Trust on 03.08.2005 was, towards corpus of the
respondent trust. He held that the market value of the shares
received was taxable in terms of Section 2(24)(iia) of the Act and
accordingly made an addition of Rs.42,41,32,500/-. On the question
of income from capital gains, as the respondent assessee had sold 4
lac shares of Nicholas Piramal India Limited during the period
20.12.05 to 03.01.06 for consideration of Rs.11,41,95,430/-, the
Assessing Officer held that there was a distinction between donation
and gift and being a donation the short term capital gains was
computed as Rs.1,13,75,430/-, instead of declared income of
Rs.13,95,711/-, in the revised return dated 10.01.2007.
5. In the first appeal, the Commissioner of Income Tax
(Appeals) came to the conclusion that the assessee could not have
filed the revised computation and decision of Goetze (India)
Limited case (supra) was applicable. Reliance placed on the
decisions by the respondent assessee did not permit the assessee
from getting over the revised return. However, he deleted addition
of Rs.1,13,75,430/-. With regard to addition of Rs.42,41,32,500/-,
ITA 188/2014 Page 3 of 13
he upheld the order of the Assessing Officer.
6. Assessee preferred further appeal before the Tribunal.
Revenue accepted the order passed by the Commissioner of Income
Tax (Appeals).
7. The Tribunal by the impugned order has held that the revised
computation filed by the assessee during the course of the
assessment proceedings and their submission that they were
withdrawing the revised return should have been accepted in view
of decisions in NTPC vs. CIT [1998] 229 ITR 383, Jute
Corporation of India Ltd. vs. CIT [1991] 187 ITR 688 (SC), CIT
vs. Jai Parabolic Springs Ltd. [2008] 306 ITR 42 (Delhi), CIT vs.
Pruthvi Brokers & Shareholders [2012] 349 ITR 336 (Bom.),
Balmukund Acharya vs. DCIT [2009] 310 ITR 310 (Bom.) and
some decisions of the Tribunal. It was further held that in the
present case the shares which were transferred or gifted to the
respondent assessee were to form part and parcel of the corpus of
the trust and therefore Section 11(1)(d) was applicable. Further
proviso (iia) to Section 13(1)(d) would protect the assessee in
respect of the assessment year in question. Thus, addition of
Rs.42,41,32,500/- was deleted.
8. The first issue which arises and has been raised in the present
ITA 188/2014 Page 4 of 13
appeal is whether the revised return filed on 10.01.2007 was binding
on the assessee, as the Trust was barred and could not have filed a
revised return. The first return was filed on 30.10.06 declaring ,,Nil
income. Then, the revised return was filed on 10.01.07. The reason
given for revising the return, as mentioned was:-
"As the foundation is holding equity shares of a limited
company it falls within the preview of section 13(1)(d)
and has lost the exemption under section 11 to 13
accordingly, a revised return of income has been field
on 30.10.2006 vide acknowledgment 02082."
9. The stand of the respondent assessee was that the aforesaid
statement was made on wrong legal advice and there was no
violation of Section 13(1)(d) in the assessment year in question.
Subsequently, during the course of the assessment proceedings the
assessee therefore stated that they withdraw their revised return, and
would rely upon their original return. Revised computation of
income was filed on the said basis.
10. We do not think that in the facts and circumstances of the
present case, the decision of Goetze (India) Limited case (supra)
would be applicable, as the assessee during the course of the
assessment proceedings, before the Assessing Officer had stated that
they had proceeded on wrong legal advice and would like to
withdraw the revised return filed on 10.01.2007 and would rely
ITA 188/2014 Page 5 of 13
upon the original return dated 30.10.2006. The Assessing Officer in
fact has gone into the merits and examined the assertions, made in
the original return.
11. In the case of NTPC case (supra), the Supreme Court had
clarified that the legal issue, which does not involve disputed facts,
can be entertained even at the appellate stage. Similar view has been
expressed in the case of Jute Corporation of India case (supra), in
which Supreme Court observed that
"6.... The declaration of law is clear that the power of
the Appellate Assistant Commissioner is co-terminus with
that of the Income Tax Officer, if that be so, there appears to
be no reason as to why the appellate authority cannot modify
the assessment order on an additional ground even if not
raised before the Income Tax Officer. No exception could be
taken to this view as the Act does not place any restriction or
limitation on the exercise of appellate power. Even otherwise
an Appellate Authority while hearing appeal against the order
of a subordinate authority has all the powers which the
original authority may have in deciding the question before it
subject to the restrictions or limitations if any prescribed by
the statutory provisions. In the absence of any statutory
provision the Appellate Authority is vested with all the
plenary powers which the subordinate authority may have in
the matter. There appears to be no good reason and none was
placed before us to justify curtailment of the power of the
Appellate Assistant Commissioner in entertaining an
additional ground raised by the assessee in seeking
modification of the order of assessment passed by the Income
Tax Officer"
ITA 188/2014 Page 6 of 13
In Jai Parabolic (supra), a division bench of this court, after
referring to judgment of Supreme Court in Jute Corporation (supra)
and some other judgments observed that there is no prohibition on
the powers of the Tribunal to entertain an additional ground which
according to the Tribunal arises in the matter and for the just
decision of the case.
In Pruthvi Brokers (supra), a division Bench of Bombay High
Court, referred to the judgments of Supreme Court in Jute
corporation (supra), NTPC (supra) and Goetze (India) Limited
(supra) and observed as under : -
"23. It is clear to us that the Supreme Court did not
hold anything contrary to what was held in the previous
judgments to the effect that even if a claim is not made before
the assessing officer, it can be made before the appellate
authorities. The jurisdiction of the appellate authorities to
entertain such a claim has not been negated by the Supreme
Court in this judgment. In fact, the Supreme Court made it
clear that the issue in the case was limited to the power of the
assessing authority and that the judgment does not impinge
on the power of the Tribunal under section 254."
Thus there cannot be any doubt or debate, that the claim and
submission could have been raised by the respondent assessee
before the appellate authorities. In either way, the issue has been
rightly decided in favour of the respondent-assessee.
ITA 188/2014 Page 7 of 13
12. The next issue which arises for consideration is whether or
not there was violation of Section 13(1)(d) of the Act as the assessee
was gifted or donated 16,50,000/- shares of Nicholas Piramal India
Limited by way of gift, by The Piramal Enterprises Executives
Trust on 03.08.05. The Assessing Officer has noted that The
Piramal Enterprises Executive Trust had passed the following
resolution in their meeting held on 03.08.05.
"Resolved that 16,50,000/- equity shares of Rs. 2/- each
in Nicholas Piramal India Limited be and hereby
transferred without any consideration to The Ajay G
Piramal Foundation 58 Ring Lajpat Nagar III New
Delhi 24 and that Mr Ajay G Piramal, and / or Dr
Swati A Piramal and /or Mr N Santhanam are hereby
severally authorized to do all such acts, deed mattes
and things as are necessary to effectuate the above
transfer."
The aforesaid resolution states that 16,50,000/ shares of Rs. 2/- each
of Nicholas Piramal India Limited should be transferred to the
respondent assessee trust and the persons, mentioned therein, were
severally authorized to do all such acts, deeds, matters and things as
were necessary to effectuate the above transfer. By a
contemporaneous letter dated 03.08.05, executed by the donor trust
to the respondent assessee, it was informed:
"Date: August 3, 2005
ITA 188/2014 Page 8 of 13
The Trustees,
The Ajay G.Piramal Foundation,
58, Ring Road,
Lajpat Nagar III,
New Delhi 110024.
Dear Sirs,
Re: Gift of 1,650,000 shares of Nicholas Piramal India
Limited
The Trustees of the Piramal Enterprises Executives
Trust have decided in its meeting held on August
3,2005 to irrevocably gift 1,650,000 shares of Rs.2/-
each of Nicholas Piramal India Limited to The Ajay G.
Piramal Foundation, 58 Ring Road, Lajpat Nagar III,
New Delhi 110024. It is directed that the said gift is
towards the corpus of the Trust, to be utilized in
accordance with your Trust Deed of charitable
purposes.
Thanking you,
For Piramal Enterpirses Limited
(in its capacity as Trustees of the
Piramal Enterprises Executives
Trust)
Sd/-
Trustee"
The aforesaid letter in categorical terms states that the gift would be
towards corpus of the respondent assessee trust. The Tribunal after
referring to the resolution and the letter, concluded and rightly
observed that both have to be read together and there was a specific
direction that 16,50,000 shares would form part of the corpus and
ITA 188/2014 Page 9 of 13
should not be treated as voluntary contribution. We do not see any
reason to interfere with the said finding.
13. In these circumstances, Section 11(1)(d) of the Act would be
applicable and the donation made, would become a part of the
corpus and would not be income earned. Section 11(1)(d) reads:
"Section 11(1): Subject to the provisions of sections
60 to 63, the following income shall not be included
in the total income of the previous year of the
person in receipt of the income--
[(a) ......
(b) ......
(c) ......
[(d) income in the form of voluntary contributions
made with a specific direction that they shall form
part of the corpus of the trust or institution.]"
14. Similarly in Section 12(1), it has been stated as under:-
"Section 12: Income of trusts or institutions from
contributions.- (1) Any voluntary contributions
received by a trust created wholly for charitable or
religious purposes or by an institution established
wholly for such purposes (not being contributions
made with a specific direction that they shall form
part of the corpus of the trust or institution) shall
for the purposes of section 11 be deemed to be
income derived from property held under trust
wholly for charitable or religious purposes and the
provisions of that section and section 13 shall apply
accordingly."
ITA 188/2014 Page 10 of 13
15. It may be relevant to state here that in the original return filed
on 30.10.06, the respondent assessee had mentioned and given the
following note:-
"On August 3,2005 the trust has received 1,650,000 shares of
Nicholas Piramal Limited as a gift from the Piramal
Enterprises Executive Trust towards the corpus of the trust
which is exempt under section 11(1)(d) of the Act.
During the year under consideration the trust has sold
400,000 shares of Nicholas Piramal India Limited in terms of
section 49(1)(ii) of the Act, the cost of acquisitions of the
shares shall be the cost for which the donor of the shares has
acquired it, which is Nil.
As specified in Explanation to section 2(42A) of the Act, in
determining the period for which the shares were held by the
trust, the period for which the shares were held by the trust
the period of which the shares were hold by the Donor is
included the period of holding of the above shares were for
more than 12 months. The shares are sold on a stock
exchange and the transaction is chargeable to securities
transaction tax accordingly, the gains arising on transfer of
shares are characterized as long term capital gain and the
same are exempt under section 10(38) of the Act."
16. It is, therefore, clear, right from the very beginning that even
when the return of income was filed on 30.10.06, the stand of the
respondent assessee was that 16,50,000 shares of Nicholas Piramal
India Limited were gifted towards and to form part of the corpus of
the trust. It was further claimed that the respondent trust had sold 4
lac shares in terms of Section 49(1)(ii). The period of holding of the
ITA 188/2014 Page 11 of 13
donor had been taken into consideration and the costs of acquisition
was taken as ,,Nil but the gain from transfer of the shares were
exempt under Section 10(38) of the Act. In view of the above
discussion, this aspect requires no interference.
17. The last issue is whether or not, the respondent assessee had
violated Section 13(1)(d) of the Act and therefore should be denied
exemption under Section 11 to 13 of the Act. Clause (iia) of proviso
to Section 13(1)(d) reads as under:-
"any asset, not being an investment or deposit in any of
the forms or modes specified in sub-section (5) of
section 11, where such assets is not held by the trust or
institution, otherwise than in any of the forms or modes
specified in sub-section (5) of section 11, after the
expiry of one year from the end of the previous year in
which such asset is acquired or the 31st day of March,
1993 whichever is later."
18. It is an admitted position that the shares in question were
acquired by the respondent assessee on 03.08.05. As per Clause (iia)
to the proviso, Section 13(1)(d), would be applicable, post period of
one year from the end of the previous year in which the shares were
acquired. That means, there would be no violation of Section
13(1)(d) on the part of the respondent assessee till 31.03.07.
19. In view of the aforesaid position, the assessee had rightly
claimed that they had not violated Section 13(1)(d) in the
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assessment year in question. Appropriate, would be to refer to
Director of Income Tax versus Shree Radha Krishan Charitable
Trust [2011] 201 Taxman 184 (Del). In this case, the assessee had
not disinvested the shares upto 31.03.93 and the assessment year
involved was 1992-93. The High Court held that the embargo
resulting in disqualification would be only applicable after 01.04.93
and therefore would be an issue to be examined in the assessment
year 1993-94 and not an issue in the assessment year 1992-93,
though this fact was known even when the assessment order was
passed for the assessment year 1992-93.
20. Learned counsel for the respondent assessee has pointed out
that the assessee has not claimed exemption from benefit of Section
11 to 13 of the Act with effect from 2007-08 onwards.
21. In view of the aforesaid discussion, the appeal is dismissed.
SANJIV KHANNA, J.
V. KAMESWAR RAO, J.
AUGUST 25, 2014
km
ITA 188/2014 Page 13 of 13